Our home buying dreams are on hold!

Our home buying dreams are on hold

At the beginning of this month, I wrote about how we are ready to stop renting and buy a home, but after talking to two different mortgage lenders, first, our bank, Meritrust, and second, Sierra Pacific Mortgage, we are just not in the financial position to buy at this time, but we learned a lot about the process and what we need to do to put ourself in a position to buy a home without financially crippling ourselves.

Erin and I were not denied, we were conditionally approved for $180,000, based upon my income alone. Erin has been out of work since December 2020 and is trying to launch an online business, so her potential income is not calculated, and I didn’t have the $1,100 child support payment included as that will end in August 2022 when our son turns 18, and his biological father will stop paying child support.

Starting with Meritrust, we were given two options, a $130,000 20 year fixed with zero down, and a $155,000 30 year fixed with a 3% downpayment. The $130,000 option would require us to have 2 months of mortgage payment in our savings account, around the $2,600 mark, $500 of earnest money, and $3,950 in upfront costs. the $155,000 option would also require a 3% deposit of $4,650 in addition to the costs of the $130,000 option, monthly payment for each would be a little over $1,000, which is roughly what we pay in rent every month. But, as things stand, we are unable to save the required cash.

Moving onto Sierra Pacific, for the $180,000 we were approved for, the cash we would need is $11,400, this includes upfront fees, closing costs, and a 3.5% downpayment, and the monthly payment would come out at a little over $1,200 per month. I am not comfortable with a $1,200 payment, we are already struggling to make ends meet with a rent payment of $1,025 per month, and like the Meritrust option, we are unable to save the $11,400 needed. And the fact that I cannot roll in my personal loan, paying $557 on top of a $1,200 mortgage payment is a deal-breaker for me, I’m not interested in crippling ourselves.

I expressed that $1,200 per month is more than I’d like to pay and I would like to keep to around the $1,025 figure, which brings us to a $150,000 mortgage, which I am fine with. The downpayment, upfront fees, and closing costs would come down to around $10,000. This still does not roll in my personal loan, which brings us back to being a deal-breaker. The personal loan that I recently took out to consolidate all our debt is killing us in terms of obtaining a mortgage. That said, the individual credit card payments, plus another personal loan, to consolidate previous credit card balances amount to more money each month.

There have been some recent developments, Erin has recently gotten a full-time job pending a drug test, and background checks, which she should start in 2 weeks’ time. This will bring in roughly $29,000 per year after taxes, which, if we can be frugal could pay off the personal loan, and save $10,000 within the next 12 – 15 months. Erin’s income could not be included in future mortgage calculations as she would need 3 years of income history for it to be included, which is fine, I’m happy with a $150,000 home.

For now, I think we should wait 18 months and see where we are in January 2023 in terms of finances. This is assuming Erin can hold onto this job, as her health is not the best, and a full-time job might be too much for her. The second consideration is that I am no spring chicken, I turn 45 this October, and a 30-year commitment takes me to my mid-70s, and that’s assuming that I live to that ripe old age.

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